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Federal Budget Backgrounder

Release Date: 5 March 1996

Vancouver, B.C. >>> On March 6th the federal government will release its budget for the fiscal year 1996/97. There will be considerable comment about whether it is a "tough budget," whether it is "tough enough," or whether it is "generous" or "generous enough."

In order to facilitate such assessments, The Fraser Institute created a budget performance index in 1995 to rate the budgets of the federal and provincial governments. The index uses 16 different measurements of fiscal performance to chart objectively the budgets of the different governments.

While it may seem inappropriate to compare the federal government to the provincial governments, the fact is that Ottawa funds only about half of the government activity in Canada, the other half coming from the provincial governments and their client municipalities. Thus, while individually the provinces are smaller than the federal government, collectively their activities have about the same impact. Comparing them to each other and to the federal government is therefore appropriate.

Last year the federal government's budget performance was the worst of all the governments in Canada. On a scale of 100, the federal government scored 18, while the top scoring provinces - Alberta, Saskatchewan and Prince Edward Island - scored in the 60 range. The components of the budget performance index give us a clear and unambiguous standard by which to measure the conduct of the federal government in its 1996/97 budget. The following are some of the variables to look for.

SPENDING PERFORMANCE

Spending per capita in the 1996/97 budget
In the 1995/96 budget, the federal government's spending per capita outstripped that in all of the "have" provinces (Ontario, Alberta, and B.C.) and in Saskatchewan and Nova Scotia. Change in real spending over last year's budget
Last year, the federal government and British Columbia were the only jurisdictions in the country that did not have a reduction in real spending. The federal government's spending increased by 0.3%. Change in real spending net of transfers
Excluding inter-governmental transfers, the federal government outstripped all jurisdictions except British Columbia and Newfoundland in its expenditures, reporting an increase of 1.1%. Other than cuts in transfers to the provinces, how much of its own spending will the federal government cut in the 1996/97 budget? That is a crucial question. Change in the share of the economy spent by the government
In the last fiscal period, all provinces except British Columbia and Newfoundland had larger reductions in the share they were taking of GDP than the federal government. Change in per capita real spending net of transfers
In 1995/96, the federal government had a smaller reduction in spending, measured in dollars per capita adjusted for inflation, than any of the provinces. The feds managed a per capita reduction of $5 in real terms, compared to reductions of $205 in Alberta and $180 in Prince Edward Island.

TAXATION PERFORMANCE

On the revenue side, the federal government fared even worse. While three of the provinces had larger per capita real tax increases, the federal government was the only jurisdiction to impose new sales tax increases in the last fiscal year.

DEFICITS AND THE DEBT

The federal deficit per capita in 1995/96 was $1,107, an amount nearly twice as large as Ontario's $704 per capita. Consequently the federal government had the largest increase in debt per capita. However, the federal government did manage to have the fourth largest reduction in the deficit as a percentage of GDP over the period.

Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.

For further information contact:

Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca

info@fraserinstitute.ca

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Last Modified: Wednesday, October 20, 1999.